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You are here: Home > Personal > Goals and life events > Family > Settling an estate > Estate settlement process

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Estate settlement process

In Ontario, the Estates Act sets out the rules for settling an estate. Income tax laws also have requirements with regards to estate settlement. Normally, the estate settlement process should resemble the following:

Despite your willingness and desire to do things right, the following steps can only be carried out once death of the testator has been declared.

Before you can start settling the deceased's estate, it is essential to determine if the deceased has left a written will expressing his wishes regarding the administration of his estate.

A close relative, the personal representative or presumed personal representative should search the deceased's personal effects, speak to his friends and family, and find out if there is a safety deposit box. If the deceased was married or living with a common-law spouse, the marriage contract or cohabitation agreement, if applicable, must be obtained to see if it includes a testamentary disposition. Similarly, if the deceased was divorced, the divorce order must be verified.

Once the search completed, it is the most recent will that applies or, failing that, the testamentary disposition, or if none exists, existing laws.

Probating the will (certificate of appointment of estate trustee)

A will is a formal legal document expressing the deceased's last wishes. However, since the deceased is no longer present, the will can sometimes create challenges for the personal representative who must convince others that he is indeed in possession of the deceased's last will.

Testators have several options to ensure that their last will and testament is accepted by everyone, but, none of these are mandatory in Ontario.

Options

  • Register the will with the Registrar of Ontario
    Take the original will to the Registrar's office. It will be placed in a sealed envelope and registered. The testator will be identified by name, date of birth, social insurance number and address at the time of registration.

    The testator's name will be entered into an electronic register available throughout Ontario. Registration is confidential. Only after the testator's death and with proof of death will the personal representative be able obtain the testator's original will from the Registrar.
  • Have a lawyer draw up the will
    Many lawyers in Ontario offer to hold their clients' original will for safekeeping in their vault. Under the rules of the Law Society of Upper Canada, wills must be kept in a location that is not accessible to the public, entirely confidential and fireproof.
  • Keep the original will in a safe place
    Testators can simply keep their original will in a safe place at home or in a safety deposit box at a financial institution.

When the testator dies, it is the personal representative's responsibility to find the deceased's original last will and testament.

Once the personal representative has found the testator's last will, the estate administration process can begin. In the process, the representative will deal with several third parties, such as financial institutions, government authorities, the real estate registry and any person in possession of the testator's property.

Since there is no prescribed process in Ontario for keeping testators' original wills, third parties may require formal proof or confirmation that the personal representative has made every reasonable effort to locate the testator's last will.

As a result, the following searches must be made to find the deceased's last will and testament:

  1. Contact to the Registrar of Ontario with the death certificate in hand, to find out if the testator's last will and testament was registered.
  2. Place a notice in the Ontario Reports to alert legal practitioners in Ontario that you are conducting a will search.
  3. Contact the local Bar association (e.g., County of Carleton Law Association), so they can automatically email all registered lawyers in the association asking if a will in the deceased' name is on file in their archives.
  4. Do a thorough search of the testator's personal files.
  5. Check all safety deposit boxes in the testator's name in financial institutions.

Once the above searches have been conducted, the personal representative must file an application with the Ontario Superior Court of Justice Estates Office (Probate Court), to have the will certified as the testator's last will and testament.

In the application, the personal representative must declare under oath that he has made all necessary searches to ensure that the original will filed with the application is the testator's last will. The application, formerly called application for probate, is now called an application for a certificate of appointment of estate trustee (see Rule 74 of the Rules of Civil Procedure, RRO 1990, Reg 194). The estate administration tax (formerly probate fee) must be paid before the certificate can be issued by the court.

Estate Administration Tax (probate fee)

The application fee is an estate administration tax that is payable upon filing the application for a certificate of appointment of estate trustee.

The fee is based on the value of the testator's assets at the time of death. It is calculated at the following rate: $5.00 per thousand for the first $50,000 of the estate value, and $15.00 per thousand for any amount over $50,000 (see section 2 of the Estate Administration Tax Act, SO 1998, c 34, Schedule).

Note

Certain of the testator's actions may revoke his will, such as a marriage or divorce. According to section 16 of the Succession Law Reform Act (SLRA), a will is revoked by a testator's marriage. Also, according to section 17 of the SLRA, the termination of the testator's marriage by a judgment absolute of divorce or nullity revokes a bequest of a beneficial interest in property to his former spouse.

The testator may have also named beneficiaries for specific assets that are not part of the estate, such as proceeds of a life insurance policy. If the deceased testator was co-owner of property with right of survivorship, the property goes to the surviving joint owner and is not included in the estate.

Laws cited:

  • Estate Administration Tax Act, 1998, SO 1998, c 34, Schedule
  • Rules of Civil Procedure, RRO 1990, Reg 194
  • Succession Law Reform Act, RSO 1990, c S.26

This step consists of determining who is entitled to the deceased's estate. Several scenarios are possible. However, in each of the following situations, for a will to be valid, it must be the original.

Scenario 1: The most recent will found is an attested will

It's important to ensure that:

  • The original will is found.
  • The will is signed at the bottom by the testator or another person in their presence and under their direction.
  • The testator has signed or recognized his signature in the presence of at least 2 witnesses present at the time of the signing. The testator's spouse and beneficiaries named in the will cannot be witnesses. Spouse and beneficiaries who are witnesses are excluded from the succession. The will is easier to probate if one of the witnesses can be contacted. However, a will is valid even if witnesses cannot be located.

If the will is valid, only the persons named in the will can be recognized as beneficiaries1.

Scenario 2: The most recent will found is a holograph will

It's important to ensure that:

  • The original will is found.
  • The will is handwritten by the testator.
  • The will is signed by the testator.

If the will is valid, only the persons named in the will can be recognized as beneficiaries1.

Scenario 3: The most recent will found is an international will

The will is recognized in the countries that have adopted the convention, which came into effect in Ontario in 1978. It's important to ensure that:

  • The original will is found.
  • The will is signed at the bottom by the testator or another person in their presence and under their direction.
  • The will was signed by the testator before 2 witnesses of legal age and a person authorized testify that the document is the testator's will and that they know its content.
  • An affidavit or declaration of the person authorized to act in connection with international wills is annexed to the will.

If the will is valid, only the persons named in the will can be recognized as beneficiaries.

Scenario 4: The most recent will found is a privileged will

It's important to ensure that:

  • The original will is found.
  • The will is signed by the testator.
  • There is a certificate signed by or on behalf of the officer with custody of the records of the force in which the testator was serving at the time the will was made, attesting that the person was on active service at that time.

If the will is valid, only the persons named in the will can be recognized as beneficiaries1

Scenario 5: There is a testamentary clause in a contract or agreement

A beneficiary can be designated for an RRSP or on a life insurance policy. It's therefore essential to check these documents along with the will. Same goes for testamentary dispositions included in marriage contracts or cohabitation agreements. Remember that a testamentary disposition in a marriage contract or cohabitation agreement can make a spouse the beneficiary of part or all of a deceased spouse's assets.

If there is a contradiction between a marriage contract or cohabitation agreement and a will, the contract or agreement takes precedence over the will. However, if a more recent will addresses the testamentary disposition, insurance policy, RRSP or other designation specifically, the will supersedes the contract or agreement.

It's important to notify insurance companies as soon as possible so they don't disburse funds to the wrong people.

It's also strongly recommended to consult a lawyer if there is a contradiction between a designated beneficiary on insurance policies, RRSPs or other, and the will.

Scenario 6: The deceased left a will with specific bequests only

After the distribution of the specific bequests, the residue of the estate is considered "intestate".

Scenario 7: The deceased left no will or testamentary clause

The succession is then considered "intestate". In the absence of a written expression of the deceased's last wishes, the Succession Law Reform Act (SLRA) determines who the successors (heirs) are. The SLRA provides the terms of the distribution of the deceased's estate prioritizing beneficiaries according to their degree of kinship with the deceased.

Thus, only those related to the deceased by blood, adoption or marriage can be named beneficiaries. Once they are determined, their status as beneficiaries must be confirmed as well as their rank in the estate (see sections 44 to 49 of the SLRA and the Escheats Act generally).

Certificate of appointment of estate trustee

It is sometimes necessary to apply for a certificate of appointment of estate trustee. The obligation to probate a will depends on the nature of the estate assets. We recommend you consult a lawyer to learn more about the process, but the Ontario government also provides useful information on its website. Go to Frequently asked questions about estates.

If have any doubt as to the validity of the will or believe the application for the probate may be contested, we suggest you consult a lawyer to avoid initiating needless procedures. In this event, applying for a certificate of appointment of estate trustee is strongly recommended.

In support of your application for certification or a request for probate, the following documents will be required by the Court:

  • the original holograph will, attested will, privileged, or international will with evidence that it is the testator's last will and testament
  • a copy of the proof of death certificate issued by the funeral director and declarations under oath (affidavits) of at least one of the witnesses (attested will) or person declaring they recognize the writing or signature of the deceased testator (holograph will).
  • proof of service or notification to successors (heirs) of the above application or request, along with the documents listed above

Once the will is legally recognized as valid by the court, only the persons named in the will can be recognized as beneficiaries.

1. In all the scenarios listed above, it is important to consider the rights of dependants, spouses and children.

Laws cited:

  • Escheats Act, RSO 1990, c E.20
  • Succession Law Reform Act, RSO 1990, c S.26

The personal representative, if known, or a beneficiary, must make an itemized list, description and valuation of all the deceased's assets and liabilities.

In practice, only assets with a relative monetary value are listed. Property with low monetary value can have great sentimental value. Therefore clothes and keepsakes of little or no monetary value are not included in the inventory . Once the inventory is made, the representative is able to confirm the preliminary status of solvency or insolvency of the estate.

The person who prepares the inventory must take all reasonable steps to ensure that the beneficiaries receive a copy of it prior to distribution, by mail or in person at a meeting, for example. The document will serve to help them exercise their right to accept or refuse the succession. To learn more, see Accept or renounce the succession.

Beneficiaries have the option to accept or refuse the succession. Usually a beneficiary will renounce a succession if it's insolvent, once the inventory has been disclosed. Conversely, a beneficiary may accept a succession if the inventory shows that it is solvent. Nevertheless, a person may, for personal or sentimental reasons, accept an insolvent estate or renounce a solvent estate.

Once the beneficiaries are known or identified, the next step is to identify and formally appoint an estate representative.

Scenario 1: There is a will with an appointment of a personal representative by the testator

This is the person who will be in charge of the estate administration. If, however, this person is predeceased, unable or not willing to assume the responsibility, the task is transferred to the replacement representative designated in the will, or alternatively, to a person designated by the majority of the heirs entitled to the majority of the estate, or by the court (see section 55 (3) of the Succession Law Reform Act and Rule 74 of the Rules of Civil Procedure.

It is important to note that a sole beneficiary automatically becomes the personal representative if no one is designated. This is especially the case in a succession devolved by testamentary disposition. A sole beneficiary may appoint another person to act as personal representative.

Scenario 2: The will does not appoint a representative or there is no will

In this event, the responsibility of naming a personal representative automatically falls upon the heirs, who must appoint the personal representative with a two thirds majority. Failing agreement, the court, at the request of one of the heirs, may appoint a representative. A designation by the majority of the heirs is done by simple written agreement, acclamation or a verbal declaration as prescribed by the Rules of Civil Procedure. In all cases, if a personal representative neglects his responsibilities, any person may apply to the court to make another appointment (see Rule 74 of the Rules of Civil Procedure).

Regardless of how personal representatives are appointed, they may delegate a portion or all of their responsibilities to a professional of their choosing, such as a lawyer or an accountant.

Once appointed by the court by the issuance of a certificate of appointment of estate trustee, the personal representative is responsible for administering the deceased's assets and liabilities in order to settle the estate. Although there is no statutory time limit to settle an estate, the personal representative must act in the best interest of the heirs, or quickly and in accordance with established rules. In this regard, the representative is personally liable for his actions.

Personal representative are entitled to be reimbursed for expenses incurred while carrying out estate administration duties. They may also be entitled to compensation. According to common practice, remuneration is approximately 6% of the value of the estate. A personal representative's remuneration must be approved by the beneficiaries. In case of disagreement, the compensation is determined by the Court, who may, at its discretion, increase or decrease the suggested rate (see section 61 of the Trustee Act).

Laws cited:

  • Rules of Civil Procedure, RRO 1990, Reg 194
  • Succession Law Reform Act, RSO 1990, c S.26
  • Trustee Act, RSO 1990, c T.23

It is strongly recommended that the personal representative open an estate account. Having an estate account helps the personal representative provide transparent management of the deceased's assets and avoid any confusion between his own assets and those of the beneficiaries or estate. The personal representative retains the right to select the financial institution. If provided for in the will, a testamentary trust can also be opened at the time the estate account is opened.

To open an estate account, most financial institutions require the following documents:

  • a copy of the proof of death certificate issued by the funeral home
  • a notarized copy of the testamentary disposition, holograph will or attested will
  • a copy of the probated will (in general, financial institutions require a probated will if total deposits exceed $50,000)

Once the account opened, the personal representative may deposit into it financial assets and money received, such as:

  • annuity payments
  • pensions
  • tax returns
  • proceeds from the sale of the deceased's assets
  • employment wages

The personal representative must notify all entities with which the deceased had a business relationship of death, including creditors, service providers, government services and financial institutions.

Here is a non-exhaustive checklist for your convenience:

  • ATM cards
  • Attending physicians
  • Cable/Internet/phone
  • Canada Child Tax Benefit
  • Child support
  • Credit cards
  • Dentists and other professionals
  • Driver's licence
  • Employer
  • Financial institutions
  • Firearm permit
  • Handicapped parking permit
  • Health insurance card
  • Hospital cards
  • Housing allowance
  • HST credit
  • Hunting and fishing permits
  • Hydro
  • Insurers
  • Library and club membership cards
  • Mortgage lender
  • Natural gas supplier
  • Newspaper and magazine subscriptions
  • Old Age Security pension and private pension plans
  • Passport
  • Professional associations
  • Provincial and federal revenue agencies
  • Residential lease
  • Social insurance card
  • Social security
  • Other

A copy of the proof of death certificate issued by the funeral home will be required for each of the above.

We also recommend that the personal representative have the deceased's mail forwarded to their home address.

In the event of a dispute regarding the designation of beneficiaries, it is important to notify insurance companies and other entities issuing death benefits within 30 days of the date of death.

The deceased may be entitled to allowances and benefits from life insurance policies, or may even have been a creditor. It is therefore important to claim all amounts due to him. Here are a few examples:

  • Federal pension plan, foreign pension plan or private pension plan benefits
  • Special entitlement for funeral costs from employment insurance or other
  • Veterans benefits
  • Life insurance
  • Employment earnings including salary, vacation pay, death benefits, bonuses, commissions
  • Acknowledgements of debts (IOUs)
  • Canada Pension Plan (CPP) death benefit (application available at funeral homes)

The personal representative may notify the surviving spouse, guardian of minor children, disabled children of the deceased or any other designated beneficiary (of life insurance, RRSPs, group pension plan, pension fund) of the opportunity to apply for and obtain death benefits.

The personal representative is responsible for preparing and filing the deceased's income tax returns, including those not filed by the deceased for the years prior to death.

A federal tax return is made on taxable earnings earned by the deceased between January 1 of the year of death and the date of death. One of an estate's largest debts is income tax owed.

Also, for tax purposes, under the Income Tax Act (ITA), the deceased is deemed to have disposed of all property at the fair market value estimated at the time of death. Resulting capital gains or losses should be included in the income tax return, known as the final return.

The final return must be filed with the competent authorities by the following dates:

  • If the death occurred between January 1 and October 31, no later than April 30 of the following year.
  • If the death occurred between November 1 and December 31, 6 months from the date of death.

Include a copy of the will, proof of death certificate issued by the funeral home and a document confirming your appointment as personal representative, such as the certificate of appointment of estate trustee.

Subsequent returns will have to be made on income generated after the date of death (trust returns). To learn how to prepare these returns, we strongly recommend you consult an accountant.

The personal representative must notify the Canada Revenue Agency of the intention to distribute estate assets, to obtain the certificate authorizing him to do so.

To obtain the clearance certificates, the personal representative must fill out and send in the appropriate form:

This form can only be sent in once tax returns have been filed, notices of assessment received and any amounts owing paid. It must be accompanied by the following documents:

  • a copy of the will, including any codicils, renunciations or disclaimers, and all probate documents
    • If the individual died intestate, attach a copy of the document appointing you administrator, such as Letters of Administration or Letters of Verification.
  • a statement listing all assets and the estate distribution plan
  • any other document required that proves you are the legal representative

Personal representative who distribute estate assets without first obtaining clearance from the CRA will held be personally liable for any tax liability up to the value of the assets.

Before distributing estate property and assets, the personal representative must submit a complete accounting of the estate administration to the beneficiaries. This includes expenses, estate income, net assets or deficit, and a plan for distributing the assets to the beneficiaries. If all the beneficiaries accept the report, the personal representative may distribute the estate assets.

We recommend the personal representative obtain the consent of all beneficiaries in writing with a formal written release authorizing the personal representative to proceed with the distribution of estate assets. We also strongly recommend you consult a lawyer to obtain consent and release forms that are recognized by the courts.

If a single beneficiary refuses or does not agree with the administration or a portion of the administration, the personal representative must have the accounts approved by the Ontario Superior Court of Justice. This procedure is called passing accounts, under section 49 of the Estates Act and section 55.04 of the Rules of Civil Procedure.

The judge has the power to approve the accounts as presented by the personal administrator, but if a beneficiary has any objection, also has the jurisdiction to make a full inquiry and have the personal administrator's report accepted or changed. The judge must distribute estate assets according to the terms of the will or the law, if no will exists. We recommend you consult a lawyer if necessary.

See Distribute estate assets.

Laws cited:

  • Escheats Act, RSO 1990, c E.21
  • Rules of Civil Procedure, RRO 1990, Reg 194

Once the accounts approved by the court or beneficiaries and the clearance certificate obtained from Canada Revenue Agency (CRA), the personal representative may distribute the assets, as long as he has also satisfied all other obligations, such as paying off all the deceased's and estate debts.

Distribution of a bequest to a minor or mentally incompetent person does not release the personal representative, since minors are unable to sign a release. If distribution of an estate is to be made to a minor or a mentally incompetent person, the personal representative must notify the Children's Lawyer Office and/or the Office of the Public Guardian and Trustee. In some cases, the assets will be paid into court on behalf of the minor or incompetent person. In other cases, the property will be held in trust by the estate representative until the child is no longer a minor. We recommend consulting a lawyer when a minor or mentally incompetent person is a beneficiary.

Note

Before making any distribution, the personal representative must have received the CRA's clearance certificate Otherwise, the personal representative may be held personally liable for any taxes due to the CRA.

When the deceased's assets are located in different provinces or countries, the personal representative must take into consideration the different estate laws and tax rules of each respective province and country.

Laws cited:

  • Substitute Decisions Act, 1992, S.O.992, c.30

When estate assets are sufficient to pay all creditors and legatees, the personal representative must make these payments. The personal representative must therefore pay electricity, gas, telephone and Internet service bills, and personal debts such as credit card balances, acknowledgements of debts (IOUs) and loans as they become due.

Sometimes it's difficult or even impossible to know with certainty what all of the estate's debts are. The personal representative must, in all circumstances, make every effort to try to find all of deceased testator's debts. Common practice is to publish a notice in a local newspaper informing creditors of the intention to distribute estate assets after a certain date (e.g., 90 days). This way personal representatives cannot be held personally liable by creditors who did not make a formal claim before estate assets were distributed (section 53 of Trustee Act).

Creditors must claim their debts before the date published, after which the personal representative may distribute the estate without liability.

If estate assets are insufficient to pay all outstanding debt, we strongly recommend you consult a lawyer before you begin making payments.

Laws cited:

  • Trustee Act, RSO 1990, c T.23

Once all debts have been paid, the personal representative must pay legatees, or people who were specifically provided for in the will. For example, I bequeath the sum of $5,000 to my godson Mark Antony, or I leave my car to my daughter Flavia. Once the specific bequests are paid, the personal representative can proceed with the distribution of the residual legacy. Residual legacies go to the beneficiaries who are entitled to a residual or percentage of the estate.

The personal representative must pay any amounts due as a result of the matrimonial rights of married or common law spouses. To this end, he must proceed with the division of the net family assets and the matrimonial rights under the marriage contract. Depending on the circumstances, the personal representative may have to make support payments to the surviving spouse, under a continued obligation for support. It's therefore important to review divorce or separation orders, child support orders, and any marriage contract, cohabitation agreement or separation agreement.

At this stage, creditors and legatees have been paid and matrimonial rights divided. The personal representative must now draw up a final report setting out the estate's net assets or loss. It is recommended you include detailed expenses, including amounts already paid to creditors, beneficiaries, family rights holders and others. The proposal for partition determines the inheritance that each beneficiary will receive.

A copy of the assets balance sheet, liabilities balance sheet and proposal for partition must be provided to the beneficiaries. They can approve or contest the final accounts and proposal for partition. If no agreement is reached, the matter must be turned over to the court for a decision.

The final step will be the delivery of estate property and assets to the heirs, either by cheque, physical delivery of the goods, deed or declaration of transmission.

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